Earnings Transcript for NLTX - Q4 Fiscal Year 2017

Executives: Brendan Payne - Associate Director, Investor Relations David Main - President & Chief Executive Officer Barbara Troupin - Chief Medical Officer & VP, Clinical Development & Regulatory Affairs Kamran Alam - VP, Finance & Chief Financial Officer

Analysts: Alan Carr - Needham & Company Adnan Butt - Guggemheim Bill Tanner - Cantor Fitzgerald Arlinda Lee - Canaccord Genuity

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Aquinox Pharmaceuticals Year End 2017 Conference Call. At this time, all participants are in a listen-only mode. Following the conclusion of the prepared remarks, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. At this point, I would like to turn the call over to Mr. Brendan Payne, Associate Director of Investor Relations.

Brendan Payne: Thank you, Karen. Good morning and thank you for joining us. On behalf of Aquinox, I’d like to welcome everyone to our conference call to discuss financial and operational results for the year ended December 31, 2017. Joining me today are Mr. David Main, CEO; Dr. Barbara Troupin, Chief Medical Officer and Vice President of Clinical Development and Regulatory Affairs; and Mr. Kamran Alam, Vice President of Finance and Chief Financial Officer. During today’s call, Mr. Main will begin with a business update of recent events. Dr. Troupin will then provide an update on our LEADERSHIP 301 Phase 3 clinical trial with rosiptor and subjects with interstitial cystitis/bladder pain syndrome or IC/BPS. Mr. Alam will then wrap up with a discussion of year end 2017 financial results. And we will conclude the call with a Q&A session. As a reminder, today’s conference call will include forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements regarding our research and development plans and financial outlook. Actual results may differ from those indicated by these forward-looking statements due to numerous factors including those discussed in the risk factor section of our most recent 10-K and other SEC filings. Our expectations and assumptions could change. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change. And with that, I’ll now turn the call over to David. David?

David Main: Thank you, Brendan, and good afternoon, everyone. And thank you for joining us. As you know, we've been on a journey over the past several years to better understand rosiptor effect on inflammation and inflammatory pain. Our Phase 2 clinical results to date have provided valuable initial data on rosiptor's potential use in reducing the debilitating pain and urinary symptoms of patients suffering from IC/BPS. We learned much from our new LEADERSHIP 201 trial with rosiptor in female subjects and much of these learnings were applied to our Phase 3 LEADERSHIP 301 trial for largest placebo controlled IC/BPS trial ever conducted. At our recent Investor and Analyst event held at February 9 in New York, we announced that we had surpassed the enrollment threshold of 300 female subjects and now enrollment has officially closed and it closed on February 15. We remain on track and are looking forward to providing top line data from this trial in Q3 of this year. I'd like to take this opportunity to recognize the hard work of the Aquinox team and our clinical research partners in overcoming some of the early delays in achieving our site initiation targets, and for working diligently since then to ensure we met our revised guidance. In our mid year 2017 call, we announced plans to expand our clinical program with rosiptor by initiating a Phase 2 clinical trial in chronic prostatitis/chronic pelvic pain syndrome or CP/CPPS early this year. And I am pleased to say that we are well on our way of initiating this trial. Regulatory submission, site selection and ethics reviews are all advancing. We will announce more specifics of the trial once patient enrollment commences. CP/CPPS is another debilitating urological condition which affects millions of males in the United States; one million of whom we estimate are diagnosed and treated. And with no FDA approved treatment for patients with CP/CPPS effective therapies are desperately needed. Now before passing the discussion over to Dr. Troupin who will recap the final enrollment details from Leadership 301 trial, very quickly I'd just like to thank those of you who took the time to attend and participate in our recent Investor and Analyst Day held in New York. At the event Dr. Philip Hanno, a clinical professor of Urology at the Stanford University School of Medicine and co-chair of the Medical Advisory Board of the Interstitial Cystitis Association shared his expert perspective on the current diagnosis and treatment landscape for patients with IC/BPS. Dr Troupin provided an update on Aquinox's clinical program and Ms. Abigail Jenkins, Aquinox's Chief Commercial Officer & US Business Head provided an overview of the prospective commercial opportunity with rosiptor in IC/BPS. And so I invite anyone who did not have the opportunity to attend or has not yet listened to the event to visit our website at investor.aquinoxpharma.com where you will find the recorded webcast link prominently featured. And with that I'd like to pass the call over to Barbara. Barbara?

Barbara Troupin: Thank you, David. For those who are newer to the story or less familiar with the disease, IC/BPS is a chronic disease of urinary bladder thought to affect some five million adults in the US. IC/BPS is characterized by the hallmark symptom of bladder pain plus one or more additional symptoms including urinary frequency urgency and/or nocturia. While the etiology of the disease has not been definitively determined many IC/BPS disease state experts believe that there's interplay between pain and inflammation in the bladder involving an activation and sensitization of nerve fibers which leads to bladder pain and in some cases central sensitization. Relief of IC/BPS symptoms remains a largely unmet medical need with no new therapies approved the FDA in over 20 years. LEADERSHIP 301 is a 12-week, three-arm, multicenter, randomized, double-blind, placebo-controlled, Phase 3 clinical trial being conducted in the United States, Canada and Europe. LEADERSHIP 301 was designed to enroll a minimum of 300 female subjects as the primary patient population but also includes the opportunity for men to participate although their data will be part of an exploratory analysis for this trial. LEADERSHIP 301 was also designed to include subjects both with and without Hunner lesions and stratified for those two populations. The primary endpoint in LEADERSHIP 301 is the change from baseline at week 12 in maximum daily bladder pain based on an 11 point 0 to 10 numeric rating scale compared to placebo in female subjects recorded by an electronic diary. LEADERSHIP 301 consists of a 12 -week treatment period in which efficacy and safety data are collected followed by 52-week extension period for accumulation of long-term safety data. Subjects who transition from the treatment period to the extension period who had received rosiptor during the treatment period will continue on their originally assigned dose, while subjects receiving placebo in the treatment period will be randomized in a blinded fashion to one of the two doses of rosiptor. This extension is anticipated to satisfy one-year RCH safety database requirements for rosiptor, while also affording all participating subjects the opportunity for active treatment. As David mentioned recruitment for the trial was closed after the randomization target of 300 females was met. Enrollment officially closed on February 15th with 341 females and 92 males enrolled for a total of 433 patients. Overall, the baseline demographics of the LEADERSHIP 301 trial have met our expectations and remain consistent with the figures we reported at our Investor and Analysts event in early February. We will provide the final baseline demographics when we report top line data from the trial in the third quarter of 2018. While we look forward to analysis and presentation of top line data and to the completion of the extension period of the 301 trial. We are also actively planning the next steps towards building a potential registration package for rosiptor in patients with IC/BPS following what we believe was a positive Advisory Committee meeting on the IC/BPS disease state held by the FDA's division of Bone Reproductive and Urologic products on December 7th of last year. We continued to engage the division in discussions on the requirements from NDA and IC/BPS since the diagnosis and treatment landscape has changed considerably since the last drug was approved more than 20 years ago. Minutes from the FDA Advisory Committee meeting are available online or upon request and aligned well with how we've designed the LEADERSHIP 301trial/ At a minimum, we are preparing for an additional confirmatory Phase 3 clinical trial in subjects with IC/BPS that will also contribute exposures for our safety database requirements. As noted earlier, we believe that the LEADERSHIP 301 trial will satisfy the necessary one-year exposures and our next Phase 3 trial plus some ongoing and plan Phase 1&2 trials will help us complete our six months and total required exposures. Any subsequent trials with rosiptor including our soon to be initiated trial and CP/CPPS will count towards these requirements, and our plan to be run in parallel rather than sequentially. Finally as David mentioned, we are well on our way to initiating the Phase 2 trial with rosiptor and CP/CPPS in the near term. The CP/CPPS trial is designed to enroll an exclusively male population with a primary endpoint of maximum daily pelvic pain. Secondary endpoints include relevant Pro scales such as the NIH chronic prostatitis symptom index pain subscale, as well as measures of sexual health and urinary frequency. As described when we announced our plans at our mid-year call last August, we have data from preclinical models and biodistribution data in the prostate that support potential role for rosiptor in the treatment of this condition. CP/CPPS is also thought to include an inflammatory component and like IC/BPS remains an area of high unmet medical need in the urology space. 2017 was a busy year in our clinical development program with rosiptor, and we look forward to reporting data and continued progress over the months ahead. With that I'll pass the call over to Kam to discuss our year end 2017 financials. Kam?

Kamran Alam: Thanks Barbara. Cash, cash equivalents short-term and long-term investments totaled $108.1 million as of December 31st, 2017 compared to $153.1 million as of December 31st, 2016. The decrease was primarily the results of the ongoing expenditures related to our LEADERSHIP 301clinical trial and IC/BPS. Research and development expenses for the year ended December 31st, 2017 increased to $36.3 million from $28.4 million for the year ended December 31st, 2016. This increase was primarily driven by increased clinical activities as Aquinox continued its LEADERSHIP 301 clinical trial with rosiptor and IC/BPS. General and administrative expenses for the year ended December 31st, 2017 increased to $14.9 million from $9.3 million for the year ended December 31st, 2016. This increase was primarily driven by higher personnel related costs, professional fees and pre commercial and market assessment activities. Net loss for the year ended December 31st, 2017 was $50.2 million compared to a net loss of $37 million for the year ended December 31st, 206. This increase was primarily driven by increased operating expenditures Aquinox continued its LEADERSHIP 301 clinical trial rosiptor in IC/BPS. We continue to expect that the cash on hand will carry us beyond top-line data from the LEADERSHIP 301 trial, and at least to mid 2019 with additional ongoing clinical development manufacturing, preclinical, pre commercial and market assessment activities taking into account. With that I'll turn the call back to David.

David Main: Thanks Kam. So 2018 promises to be a decisive year for Aquinox and for the clinical development of rosiptor. We look forward to keeping investors apprised of development progress with top-line data from LEADERSHIP 301 on the near-term horizon. We also look forward to further engagement with regulators following the recent advisory committee meeting with Barbara mentioned. So that we're fully aligned on our clinical path with rosiptor going forward. Our investors support has been essential in getting us to this exciting point in the development of both rosiptor and Aquinox for which we are exceedingly grateful. So thank you all again for joining us today. And we look forward to announcing top-line 301 data later this year, while continuing to update you on other important event as they arise. Operator, we can now open the call to questions.

Operator: [Operator Instructions] Thank you. Our first question comes from the line of Alan Carr with Needham & Company.

Alan Carr: Hi, thanks for taking my questions. A couple of them. One of them when it comes to chronic prostatitis, you have pain as the primary endpoint. I'm wondering to what extent urinary frequency is you have as a secondary but to what extent is it relevant for that indication compared to bladder pain syndrome? And then also with respect to burn and cash burn in 2018, is that roughly in line with what we saw in 2017 or should it be a little bit more? Thanks.

David Main: Great. Well, we'll deal with the chronic prostatitis question first. Barbara, do you want to take those?

Barbara Troupin: Yes. Certainly, thanks Alan for the question. So in terms of pain the CP/CPPS is one of the chronic pelvic pain syndromes. So like IC/BPS, we do see pain as the primary factor which is why we've chosen pain endpoint as the primary, and then others as secondary. So it is still the predominant symptom of the disease is pain driven. So some patients do also have other urinary, lower urinary tract symptoms like frequency, but pain is going to be the prominent one.

Alan Carr: How common is the urinary symptoms and symptoms outcome are urinary symptoms in chronic prostatitis?

Barbara Troupin: I don't have an exact number for you. I know that it's again similar to IC/BPS. There's some variability in the urinary symptoms by individual, and so I would say that they are common but I can't give you a percentage experiencing them at the moment, apologies.

Alan Carr: No, it's all right. And then the burn?

Kamran Alam : In the burn, Alan, as we mentioned, we have cash sufficient to get us into mid 2019 and burn obviously depends greatly on the specific trials that are being run, and where we're at with those, but I wouldn't expect much difference from the current year.

Operator: Our next question comes from the line of Adnan Butt with Guggemheim Security.

Adnan Butt: Hi, thanks for taking the question. I'll have two. First on the Phase 3 study. This concept of spontaneous waxing, waning of pain. Did you see that in the Phase 2 and if it does exist does it ever reach that one point threshold?

David Main: Barbara you want to take that?

Barbara Troupin : Yes, so you do see some waxing and waning but the part of the reason that we are doing pain diaries that our daily diaries are so that that data is collected and averaged. So you can smooth some of the daily variability as you look at your endpoints because you're collecting a week at a time, and averaging that for each of your endpoints. So that does help with waxing and waning you see it in both groups so in whether you're on active or placebo with the averaging over a week. You don't see kind of a disruption in your ability to look at that data. So we feel that the two strategies of repeated daily entries and comparison to placebo minimizing if any effect that would have.

Adnan Butt: Okay and then just one on prostatitis, at this time can you say what does you would be taking into that study and when to expect a readout from that Phase 2?

Barbara Troupin: Yes. I can start with the dose, so we're planning on using the 200 milligram dose, that's the dose for which we have the greatest information. So that is the dose plan for that study, and that study in terms of when we're expecting readout will be later in 2019. But I don't know, David, if you want to give any more specific guidance there.

David Main: Yes. I think that it'll be sometime in 2019 as we've done previously. We will really will wait until the trials running for some period of time and we get a good handle on enrollment rate, and then we'll try to be more granular on specific about the timing of the data, But it'd be sometime in 2019.

Operator: Our next question comes from the line of Bill Tanner with Cantor Fitzgerald.

Bill Tanner: Thanks for taking the questions. Barbara had one for you, as it relates to the CP/CPPS sort of as you're viewing the probability of technical success or PTS. I'm wondering if what from the 301 studies and IC/BPS you might you look at to get a sense as to maybe an increase I guess optimism that rosiptor is going to be effective in CP/ CPPS. And I guess I'm wondering is would it be the totality of the 301 data or maybe looking at the male subset. And then I had a follow-up please.

Barbara Troupin: Yes, certainly. So I mean I would start with the fact that we have data from preclinical models that lead us to believe that you would get an effect in the prostate from a pain condition using rosiptor. So with combination of the preclinical models, as well as knowing that CP/CPPS is also a pain condition with an inflammatory component, those are what led us to embark on this indication to begin with. I think data across the 301 program will be encouraging to help us with that, but I think you would look at -- I would say the data in totality not just the data in men because you're looking at inflammation and pain, and that should be agnostic to males or females.

Bill Tanner: Okay, no, it's helpful, thank you. And then I guess maybe it's a pretty straightforward or obvious answer but as you think about positive top-line, potentially positive top-line data from 301. What kind of an impact do you think that would have then on the enrollment pace for either CP/ CPPS or for the second Phase 3 trial in IC/BPS? And kind of obvious but I'm just sort of wondering to what extent you think that's going to really move the needle or do a contemplate maybe the same sites enrolling patients in subsequent studies.

Barbara Troupin: Yes. As part of the data readout activities, we certainly would share that data with our investigative sites and the experts. We'll also be getting that data into the scientific literature into meetings as quickly as possible. I think the dissemination of positive data definitely does give enthusiasm. We've also worked pretty closely with the Interstitial Cystitis Association. So they would likely pick up any press releases or data that we had that was positive would get it directly to the patients in addition to the clinician community. So it would be our hope that rapid dissemination of that data would definitely help in the enrollment to subsequent trials.

Bill Tanner: And that may be the last question and would you contemplate that there that anything in the results might make one modify the design of a subsequent studies. For example if it looks like the rosiptor was clearly effective perhaps physicians might be reluctant to enroll patients and if there wasn't more of a skew towards the opportunity to get what they would perceived it to be the active treatment.

Barbara Troupin: Yes. And I mean certainly the fact that this is the largest study, placebo controlled study ever run in IC/BPS that we've done a nice job of collecting baseline characteristics. The part of the reason that we have done sequential trials to date is that we want that information. We want to make sure that the design of subsequent trials has the greatest probability of success. And if there's the things that we learn from 301 will help us optimize the design of the next set of trials. So we will definitely take that into account. Again, the challenge of with the positive trial certainly everybody would want to be on an active arm. And unfortunately for regulatory purposes, you do still need a placebo control. So while that's unfortunate that's all part of the informed consent process. So patients would have an understanding of what the probability of getting active drug would be. But it's unlikely that we would be able to stop doing placebo control trials until we got closer to approval.

Bill Tanner: Got it, okay, thanks very much.

David Main: And Bill, this is David. Just add a couple of things about the enrollment speed. Clearly having more data and greater awareness would help us, but as we've learned probably some of the most important aspects of getting these trials done efficiently are around site identification. So I think we've been through that a lot now. So we have a bigger stable of clinical sites that are now familiar with us and we're familiar with them. That's a positive thing, but at the end of the day it's still the inclusion, exclusion criteria. They probably have the biggest impact on enrollment speed, and we probably to continue to enroll a modulus population for regulatory purposes. We won't be able to change that very much, but one of the things that Barbara and her team has done a really nice job of is starting to think about some additional complementary trials that we could start to run that would add to our database from a safety perspective, and maybe just generally gather some interesting information that could be used for publication. And these would be maybe patients that wouldn't have met the criteria for our pivotal study. So we're also trying to think of ways of capturing more of the patients that are like screen failures from the pivotal trials as well.

Operator: Our next question comes from the line of our Arlinda Lee with Canaccord.

Arlinda Lee: Hi, guys. Thanks for taking my question. I had a question it may be just following up on one of the earlier questions. I'm kind of curious you're hoping to see a male population and what kind of data --what should we expect from the data set for third quarter? Thanks.

Barbara Troupin: Yes. Hi, Arlinda. So from the male population that will be an exploratory analysis because the study is currently powered for female subjects, but that data, our goal is we will look at primary and secondary endpoints like we will do in females to be able to say if there are any differences by sex male or female, our hope would be that if you see similar safety and efficacy and responsiveness levels that you could do all of your subsequent studies agnostic to male or female. So our goal would be to show that those are similar and that you wouldn't have to exclude males. This is just our first experience with males. And so our goal would be to not have to divide them up in the future.

Arlinda Lee: Okay, great. And then how many males were there, did you say that had enrolled in the end?

Barbara Troupin: Yes. I make sure I have that number right in front of me 92.

Arlinda Lee: 92 and then on the Hunner lesion. Can you give us any color on what proportion of patients enrolled with Hunner lesions? And then also in the females what is kind of a scope of data that we might see on 301 in the third quarter?

David Main: Yes. Arlinda, this is David. In terms of just said -- the one thing I probably directed you, Arlinda trying to repeat it all because it wouldn't want it verbally to be confusing. Again, if we could just direct you back to the slides from the Analyst Investor Day because that's where Barbara presented some very concretely what all of the top line analysis will be, and what it'll include. That's probably the easiest place for you to get that concrete answer.

Barbara Troupin: Yes. And I would look at the baseline demographics there as well because we're -- we won't be updating that again until we release top line data. So that's the most current look at the baseline criteria including presence or absence of Hunner legion.

Operator: Thank you. And that concludes our question-and- answer session for today. I'd like to turn the conference back over to Brendan Payne for any closing comments.

Brendan Payne: Just as David said earlier, I want to thank all our investors for their continued support and for everyone who joined us for this call. Please don't hesitate to contact us if you have any additional questions. Otherwise we look forward to speaking with you when we have a further update.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may now disconnect. Everyone have a great day.